Assume that the union wage already exceeds the market-clearing wage. If the union wage is increased, holding other factors constant, then the number unemployed ________ and the number employed ________.

Question

Quizplus · Accepted Answer

At wages above the market clearing level, more workers are supplied than demanded. If the wage goes up from there, the number unemployed will increase further because more labor will be supplied and even less will be demanded. The decrease in the quantity of labor demand is the same thing as a decrease in the number of employed.

Assume That the Union Wage Already Exceeds the Market-Clearing Wage